Dow Chemical 2014 Annual Report Download - page 62

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Provision for Income Taxes
The provision for income taxes was $1,426 million in 2014, compared with $1,988 million in 2013 and $565 million in 2012.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned, reinvestment assertions
regarding earned income and the level of income relative to tax credits available. For example, as the percentage of foreign
sourced income increases, the Company's effective tax rate declines. The Company's tax rate is also influenced by the level of
equity earnings, since most of the earnings from the Company's equity method investments are taxed at the joint venture level.
The underlying factors affecting the Company's overall tax rate are summarized in Note 22 to the Consolidated Financial
Statements.
The tax rate for 2014 was positively impacted by the geographic mix of earnings, with the most notable components being
improved profitability in Europe and Asia Pacific. Equity earnings have remained strong, providing additional favorable impact
on the tax rate. The tax rate was also favorably impacted by a reduction in the tax impact on remittances by foreign subsidiaries
to the United States. The tax rate was negatively impacted by a continued increase in statutory income in Latin America due to
local currency devaluations, and increases in valuation allowances, primarily in Asia Pacific. These factors resulted in an
effective tax rate of 27.1 percent for 2014.
The tax rate for 2013 was favorably impacted by increased equity earnings; the K-Dow arbitration award, due to favorable tax
treatment of certain components of the award; and changes in valuation allowances in the United States on state income tax
attributes and capital loss carryforwards. The tax rate was unfavorably impacted by adjustments to uncertain tax positions
related to court rulings on two separate tax matters and the establishment of valuation allowances outside the United States.
Additionally, the tax rate was unfavorably impacted by an increase in statutory taxable income in Latin America, primarily due
to local currency devaluation. These factors resulted in an effective tax rate of 29.2 percent for 2013.
The tax rate for 2012 was negatively impacted by a change in the geographic mix of earnings, notably a decrease in earnings in
Europe and an increase in earnings in the United States, as well as reductions in equity earnings. Equity earnings were further
impacted by asset impairment and restructuring charges at Dow Corning. Additionally, the Company's impairment of the Dow
Formulated Systems reporting unit goodwill and the impairment of the long-lived assets of Dow Kokam received minimal tax
relief. The tax rate was favorably impacted by a change in the permanent reinvestment assertions of certain affiliates in Europe
and Asia Pacific; however, this was primarily offset by unfavorable adjustments to uncertain tax positions and valuation
allowances. These factors resulted in an effective tax rate of 33.9 percent for 2012.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests was net income of $67 million in 2014, net income of $29 million in
2013 and net loss of $82 million in 2012. Net income (loss) attributable to noncontrolling interests increased in 2014 compared
with 2013, primarily due to increased earnings at certain Performance Materials & Chemicals joint ventures and the 2013
divestiture of Dow Kokam. Net income (loss) attributable to noncontrolling interests increased in 2013 compared with 2012,
primarily due to reduced losses at Dow Kokam, which was impacted by a significant restructuring charge related to the write-
down of long-lived assets in the fourth quarter of 2012. On November 22, 2013, the Company sold its ownership interest in
Dow Kokam. See Notes 3 and 5 to the Consolidated Financial Statements for details on the Dow Kokam impairment charge
and divestiture. See Note 24 to the Consolidated Financial Statements for additional information concerning noncontrolling
interests.
Preferred Stock Dividends
Preferred stock dividends of $340 million were recognized in 2014, 2013 and 2012. These dividends related to the Company's
Cumulative Convertible Perpetual Preferred Stock, Series A. See Note 21 to the Consolidated Financial Statements for
additional information.
Net Income Available for Common Stockholders
Net income available for common stockholders was $3,432 million ($2.87 per share) in 2014, compared with $4,447 million
($3.68 per share) in 2013 and $842 million ($0.70 per share) in 2012.
Certain Items Impacting Results
The Company's management believes that measures of income adjusted to exclude certain items ("non-GAAP" financial
measures) provide relevant and meaningful information to investors about the ongoing operating results of the Company. Such
financial measures are not recognized in accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP") and should not be viewed as an alternative to U.S. GAAP financial measures of performance.